| FAIR VALUE |
6. FAIR VALUE
Fair Value of Assets and Liabilities
The fair value of cash and cash equivalents, accounts receivable, current loans receivable, accounts payable, commercial paper and borrowings under revolving credit facilities are estimated to equal their carrying amounts due to the short maturity of those instruments. Notes receivable and noncurrent loans receivable are recorded based on what the Company expects to receive, which approximates fair value. Noncurrent loans receivable are in other noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets. The Company regularly evaluates the credit quality and collection profile of its customers to approximate fair value.
The estimated fair value of long-term debt, including current maturities, excluding natural gas meter sale leasebacks, debt issuance costs and solar asset sale leasebacks, is as follows: | | | | | | | | | | (Thousands) | March 31,
2026 | September 30,
2025 | Carrying value (1) (2) | $ | 2,917,845 | | $ | 2,917,845 | | | Fair market value | $ | 2,561,682 | | $ | 2,631,512 | |
(1)Excludes NJNG's debt issuance costs of approximately $11.2M and $11.3M as of March 31, 2026 and September 30, 2025, respectively. (2)Excludes NJR's debt issuance costs of approximately $2.6M and $2.9M as of March 31, 2026 and September 30, 2025, respectively. The Company enters into sale leaseback transactions for certain commercial solar assets and natural gas meters. These transactions are recorded within long-term debt on the Unaudited Condensed Consolidated Balance Sheets. The carrying value of solar sale leasebacks was approximately $498.8M and $471.5M and the estimated fair value was approximately $501.9M and $481.4M as of March 31, 2026 and September 30, 2025, respectively. The carrying value of the natural gas meter sale leasebacks was approximately $43.6M and $33.5M and the estimated fair value of certain natural gas meter sale leasebacks amounted to approximately $42.5M and $32.5M as of March 31, 2026 and September 30, 2025, respectively.
The Company utilizes a discounted cash flow method to determine the fair value of its debt. Inputs include observable municipal and corporate yields, as appropriate for the maturity of the specific debt instrument and the Company's credit rating. As of March 31, 2026 and September 30, 2025, the Company discloses its debt within Level 2 of the fair value hierarchy.
Fair Value Hierarchy
The Company applies fair value measurement guidance to its financial assets and liabilities, as appropriate, which include financial derivatives and physical commodity contracts qualifying as derivatives, investments in equity securities and other financial assets and liabilities. In addition, authoritative accounting literature prescribes the use of a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on the source of the data used to develop the price inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to inputs that are based on unobservable market data and includes the following:
| | | | | | | | | | Fair Value Hierarchy | Description of Fair Value Level | Fair Value Technique | | Level 1 | Unadjusted quoted prices for identical assets or liabilities in active markets | The Company’s Level 1 assets and liabilities include exchange-traded natural gas futures and options contracts, listed equities and money market funds. Exchange-traded futures and options contracts include all energy contracts traded on the NYMEX, CME and ICE that the Company refers to internally as basis swaps, fixed swaps, futures and financial options that are cleared through an FCM.
| | Level 2 | Other significant observable inputs, such as interest rates or price data, including both commodity and basis pricing that is observed either directly or indirectly from publications or pricing services | The Company’s Level 2 assets and liabilities include over-the-counter physical forward commodity contracts and swap contracts, SREC contracts or derivatives that are initially valued using observable quotes and are subsequently adjusted to include time value, credit risk or estimated transport pricing components for which no basis price is available. Level 2 financial derivatives consist of transactions with non-FCM counterparties (basis swaps, fixed swaps and/or options). Inputs are verifiable and do not require significant management judgment. For some physical commodity contracts, the Company utilizes transportation tariff rates that are publicly available and that it considers to be observable inputs that are equivalent to market data received from an independent source. There are no significant judgments or adjustments applied to the transportation tariff inputs and no market perspective is required. Even if the transportation tariff input were considered to be a “model,” it would still be considered to be a Level 2 input as the data is: •widely accepted and public; •non-proprietary and sourced from an independent third party; and •observable and published. These additional adjustments are generally not considered to be significant to the ultimate recognized values.
| | Level 3 | Inputs derived from a significant amount of unobservable market data | These include the Company’s best estimate of fair value and are derived primarily through the use of internal valuation methodologies.
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Assets and liabilities measured at fair value on a recurring basis are summarized as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | | | (Thousands) | (Level 1) | (Level 2) | (Level 3) | Total | | As of March 31, 2026 | | | | | | | | | | | | Assets: | | | | | | | | | | | | Physical commodity contracts | | $ | — | | | | $ | 4,129 | | | | $ | — | | | $ | 4,129 | | | Financial commodity contracts | | 7,122 | | | | — | | | | — | | | 7,122 | | | | | | | | | | | | | | | | | | | | | | | | | Money market funds | | 100,005 | | | | — | | | | — | | | 100,005 | | | Other | | 2,404 | | | | — | | | | — | | | 2,404 | | | Total assets at fair value | | $ | 109,531 | | | | $ | 4,129 | | | | $ | — | | | $ | 113,660 | | | Liabilities: | | | | | | | | | | | | Physical commodity contracts | | $ | — | | | | $ | 9,224 | | | | $ | — | | | $ | 9,224 | | | Financial commodity contracts | | 4,160 | | | | — | | | | — | | | 4,160 | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities at fair value | | $ | 4,160 | | | | $ | 9,224 | | | | $ | — | | | $ | 13,384 | | | As of September 30, 2025 | | | | | | | | | | | | Assets: | | | | | | | | | | | | Physical commodity contracts | | $ | — | | | | $ | 5,051 | | | | $ | — | | | $ | 5,051 | | | Financial commodity contracts | | 9,782 | | | | — | | | | — | | | 9,782 | | | | | | | | | | | | | | | | | | | | | | | | | Money market funds | | 5 | | | | — | | | | — | | | 5 | | | Other | | 2,589 | | | | — | | | | — | | | 2,589 | | | Total assets at fair value | | $ | 12,376 | | | | $ | 5,051 | | | | $ | — | | | $ | 17,427 | | | Liabilities: | | | | | | | | | | | | Physical commodity contracts | | $ | — | | | | $ | 9,811 | | | | $ | — | | | $ | 9,811 | | | Financial commodity contracts | | 2,092 | | | | — | | | | — | | | 2,092 | | | | | | | | | | | | | | Total liabilities at fair value | | $ | 2,092 | | | | $ | 9,811 | | | | $ | — | | | $ | 11,903 | |
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